Global trends in environmental litigation

Environmental litigation is evolving rapidly, with courts playing an increasingly critical role in safeguarding ecosystems and human health. While the majority of strategic cases have been directed at states and public entities, litigants are also directing at corporates, including financial institutions.

According to “Climate-related litigation: recent trends and developments” and “Nature-related litigation: emerging trends and lesson learned from climate-related litigation” published by Network for Greening the Financial System (“NGFS”) in September 2023 and July 2024 respectively, more than 70% of climate-related litigations were brought against states and public entities including central banks and supervisors in 2021 and 2022.

Actions against states and public entities are increasingly relying on, among the others, international climate commitments, and fundamental rights to challenge state decisions to (i) grant licences for fossil fuel exploration and extraction and for the construction of fossil-fuel infrastructure (such as power plant); or (ii) to invest in or providing finance such projects. Such cases can pose a more immediate and direct risk to financial and non-financial institutions with a financial interest in such projects, by delaying such projects, by making them more costly, or even blocking the project altogether, potentially resulting in financial loss and stranded assets.

Litigation against states

In Urgenda Foundation v The Netherlands [2015] (“Urgenda”), courts ordered the government to cut greenhouse gas (“GHG”) emissions by 25% to fulfil its duty of care to protect Dutch citizens against the imminent danger caused by climate change.

In Neubauer et al v Germany [2020] (“Neubauer”), a group of German youth filed a legal challenge to Germany’s Federal Climate Protection Act (“KSG”) in the Federal Constitutional Court, arguing that the KSG’s target of reducing GHG by 55% until 2030 from 1990 levels was insufficient. The complainants alleged that the KSG therefore violated their human rights as protected by the Basic Law, Germany’s constitution. The Court ruled that the country’s climate laws were insufficient to protect future generations, leading to stricter emission targets. 

In New Zealand, Whanganui River was granted legal personhood in 2017, allowing it to be represented in court. As a result, decisions that affect Whanganui River must recognise the river’s legal status and its health and well-being.

Litigation against corporates

Cases against fossil fuel and energy companies have continued to grow. These cases include claims against fossil fuel companies for physical damage and/or the need to adopt adaptation measures, allegations of misleading sustainability claims (greenwashing); challenges to proposed investment in carbon intensive projects; allegations of failure to adhere to climate and environmental regulation; and failure to reduce carbon emissions.

In Milieudefensie et al v Royal Dutch Shell plc [2019] (“Shell”), a Dutch court ordered Shell to cut its CO2 emissions by 45% by 2030 compared to 2010 levels and to zero by 2050, in line with the Paris Climate Agreement (the “Paris Agreement”), marking the first time a company was legally bound to align with the Paris Agreement. 

This trend can be expected to increase as companies are required to increase transparency and accuracy in respect of their climate and environmental impacts as a result of legislative and non-legislative measures mandating that ESG indicators must be included in corporate reporting.

Strategic cases are also increasingly filed against a more diverse range of corporates.

Types of litigation

In 2021, 38 cases were brought against corporates, with more than half of the cases filed against defendants in sectors other than fossil fuels and energy, notably food and agriculture (5 cases), transport (4 cases), plastic (5 cases) and finance (9 cases). A wide variety of legal arguments are brought against companies in the private sector from claims under tort law, supported by arguments that corporate actors have responsibilities to respect and protect human rights; claims under corporate due diligence legislation; under consumer protection and competition law; to challenge alleged greenwashing; and under company law, to challenge directors, for breaches of their fiduciary duties.

Allegations against greenwashing are being taken not only as actions before judicial bodies, but also as complaints to supervisory, advertising and oversight authorities. Claims can be based on accusations of frauds, misrepresentation and breaches of consumer protection and advertising laws.

Financial and legal implications for corporates

Climate disclosure laws in certain jurisdictions may have a transnational impact, particularly due to companies’ cross-listing in capital markets in different jurisdictions. Securities laws or regulations requiring climate disclosure in jurisdictions where capital market centres are located are likely to apply to foreign companies listed in that jurisdiction. As a result, this may generate climate litigation against foreign public companies. In turn, climate litigation arising from the new climate-disclosure requirements may potentially impact risk-assessment in the financial system from these companies’ countries of origin.

Cases against corporates can have significant financial implications not only for the defendants to the litigation but also for other institutions with financial exposures to the defendants. Such litigation can lead to direct financial impact on the value of the company, its creditworthiness and/or its financing costs. This can, in turn, have an impact on the company’s share price, and result in stranded assets.

Further, climate-related litigation risk could present a potential exposure and risk management challenge for some insurers, particularly where litigants are seeking financial redress, and are successful, but also in respect of legal defence costs, regardless of whether the litigation is successful. This, in turn could lead to increases in premia or the withdrawal of insurers from certain lines of business.

Climate-related litigation against financial institutions

Climate-related litigation against financial institutions shows emerging trends, in particular in respect of claims of greenwashing and breaches of directors’ duties.

In Australia, in the case Catherine Rossiter v ANZ Group Holdings Limited [2023], a shareholder of a listed financial group in banking and other business has sought the court’s permission to access internal risk management documents, claiming that the bank within the listed group has failed to properly manage climatic change and biodiversity loss crisis.

In the UK, GLAN and London Metal Network has filed an application before the High Court in February 2024, asserting that the London Metal Exchange allowed the trading of “dirty metals” sourced from the West Papua Province of Indonesia, which are allegedly proceeds of environmental crimes.

In respect of greenwashing, there is an increasing risk that climate-related disclosures become the subject of litigation before courts or become subject to investigations by advertising standards authorities, by supervisory authorities or even by public prosecutors.

In light of such developments, supervisors may need to ensure that such liability risk is incorporated into financial institutions’ operational risk management, and that appropriate account is taken of the financial impact arising from reputation risks.

International initiatives on environment litigation risks

Internationally, 195 countries and the EU signed the Kunming-Montreal Global Biodiversity Framework (“GBF”) in December 2022. The GBF sets out the targets of, among others, restoration of at least 30 percent of terrestrial and marine ecosystems by 2030, and taking measures to encourage and enable multi-national enterprises and financial sectors to regularly monitor, assess and disclose their risks and impacts on biodiversity through their operations, portfolios, and value chain. While international standards and commitments need to be transposed into national laws by legislation to give effects to rights and obligations, some courts may utilise the possibility to interpret national laws in light of these texts. 

The Taskforce for Nature-related Financial Disclosures (“TNFD”) issued its recommendations to assist business and financial institutions in integrating nature-related considerations into decision-making processes, risk management, and disclosures in September 2023. Some states might implement the TNFD framework in their legislation, similar to the roadmap taken with recommendations for the Taskforce on climate-related financial disclosures (“TCFD”).

Ecocide, the mass damage and destruction of ecosystems, is recognised as crime in some countries, and further jurisdictions are introducing severe penalties for ecocide. Civil society organisations are lobbying for the establishment of ecocide as an international crime under the Rome Statute of the International Crime Court, along with its incorporation into national legislation.

Increasing understanding of the climate-nature nexus may influence litigants to explore synergies between those concepts for supporting their reasoning and strengthening their claims. Such trends may be accelerated through the openness of courts to engage with advanced scientific concepts and sources as evidenced in climate cases such as Urgenda, Shell, and Neubauer.

Environmental litigation in Hong Kong

Hong Kong has seen an increase in judicial review cases challenging government decisions that impact the environment. In Ho Loy & Anr v Director of Environmental Protection [HCAL21/2015], the Applicants challenged the government’s decision to approve the project for the expansion of the Hong Kong International Airport by the construction of a third runway on the grounds of, among others, noise and air quality impact assessments, and ecological impact assessment concerning Chinese White Dolphins. The Court declined the application for judicial review on one of the grounds that the Court is concerned primarily with the procedure to be followed in the environmental impact assessment, not the merits, unless it is a case of Wednesbury unreasonableness, i.e. irrationality and illogicality.  

While Hong Kong has yet to see any major lawsuit, activists are increasingly using legal avenues to push for stronger air quality regulations. In Clean Air Foundation Ltd & Anr v The Government of the HKSAR [HCAL35/2007], the Applicants contended that the Government has failed to use its power under s.7 of Air Pollution Control Ordinance (Cap. 311 of the Laws of Hong Kong) to introduce up-to-date air quality objectives and sought an examination of why the legislation prohibits the sale of certain diesel fuel but does not prohibit its importation or use. The Court refused to give leave for judicial review on one of the grounds that issues of importance to the community are for political process but not for the court to determine.

Hong Kong courts sometimes sided with environmental groups, mandating stricter assessments before approving projects in ecologically sensitive areas. The case Chan Ka Lam v The Country and Marine Park Authority [HKCFA 33/2020] concerns the Country Parks Ordinance (Cap 208 of the Laws of Hong Kong), which established the Country and Marine Parks Board (the “Board”), a consultative body to advise the Director of Agriculture, Fisheries and Conservation (the “Authority”). The Board comprises the Authority and 5 members who are public officers and members who are not public officers, including those representing conservation interests.  One of the functions of the Board is playing an adjudicative role in the statutory designation process of country parks and in the control of the use of leased land within a country park.

In this case, the Court of Final Appeal made two orders:

1.      an order of certiorari, which is issued by a superior court to direct that the record of the lower court be sent to the superior court for review, to bring up and quash the Authority’s decision not to consult the Board on the Authority’s assessment and decisions regarding the suitability or otherwise of designating the enclaves at certain locations as country parks; and 

2.      an order of mandamus, which is a court order that commands a government official or entity to perform an act it is legally required to perform as part of its official duties, or to refrain from performing an act the law forbids it from doing, requiring the Authority to put before the Board an assessment of the suitability of incorporating each of the 6 enclaves into country parks in accordance with the law for its consideration and advice, and to consider the advice of the Board thereon in formulating its recommendation to the Chief Executive for the designation of areas as country parks pursuant to s.4(a) of the Country Parks Ordinance. 

In Hong Kong Golf Club v Director of Environmental Protection & Anr [HKCFI 1279/2024], the Applicant applied for judicial review of the decision made by the Director of Environmental Protection ("DEP") in the approval of the environmental impact assessment ("EIA") report relating to a proposed housing development ("Project") on a site being land then held by the Fanling Golf Club and operated by the Applicant ("Decision"). The project proponent is the Civil Engineering and Development Department ("CEDD").

In this case, the Court found that the EIA report was flawed in its assessment of the environmental impacts of the Project across a range of areas studied encompassing, among others, old and valuable trees, tree compensation, and hydrological impact on critically endangered Chinese Swamp Cypress trees. 

The Court pointed out that public participation in the EIA process is a central pillar of the legislative scheme of the Environmental Impact Assessment Ordinance (Cap. 499 of the Laws of Hong Kong) and ruled that DEP (i) failed to undertake public consultation on additional information supplied by CEDD after the conclusion of the statutory consultation period and (ii) erred by failing to consider the Applicant’s responses to that additional information. Therefore, the Applicant is entitled to the order of certiorari quashing the Decision.

Measures for financial institutions to lower environmental litigation risks

Hong Kong’s financial institutions’ operation is transnational. Hong Kong’s financial sector is subject to increasing exposure to environmental litigation risks, driven by stricter regulations, global climate accountability trends, and growing investor scrutiny in Hong Kong and elsewhere. Banks, asset managers, and insurers should adopt proactive measures to mitigate legal threats while aligning with Hong Kong’s green finance ambitions. Here are some business policy management suggestions for lowering environmental litigation risks:

1.      Strengthen ESG due diligence and risk management

a.      Enhanced environmental risk screening

i.       Apply the Hong Kong Monetary Authority’s (“HKMA”) green and sustainable finance initiatives: Follow HKMA climate risk management guidelines for banks.

ii.      Adopt Equator Principles: Apply these global standards for assessing environmental and social risks in project financing.

b.      Avoid high-risk sectors

i.       Screen high-risk clients: Avoid financing companies linked to illegal land use, pollution, or biodiversity harm (e.g., controversial reclamation projects).

2.      Improve climate and ESG disclosures

a.      Comply with Hong Kong and global standards

i.       Follow Hong Kong Stock Exchange’s (“HKEX”) ESG reporting rules: Hong Kong-listed companies must disclose climate-related risks under HKEX’s ESG reporting framework.

ii.      Align with TCFD and International Sustainability Standards Board: Ensure climate disclosures meet international benchmarks to avoid greenwashing claims.

b.      Avoid misleading green claims

i.       Third-party verification: Obtain independent audits for ESG funds and green bonds to prevent litigation (e.g., cases like SEC v BNY Mellon over ESG misstatements).

ii.      Clear labelling: Avoid vague terms like “sustainable” without proper evidence.

3.      Engage with regulators and stakeholders

a.      Collaborate with HKMA and SFC

i.       Participate in HKMA’s Climate Risk Stress Tests to assess litigation exposure.

ii.      Engage with the Securities and Futures Commission (“SFC”) on evolving ESG fund rules.

b.      Address community and NGO concerns

i.       Grievance mechanisms: Allow affected communities to raise concerns before they escalate into lawsuits (e.g., protests against financed infrastructure projects).

ii.      Dialogue with environmental groups: Proactively engage with NGOs like WWF-Hong Kong or Clean Air Network.

4.      Legal and contractual safeguards

a.      Strengthen loan and investment agreements

i.       Environmental covenants: Require borrowers to comply with Hong Kong’s Environmental Impact Assessment Ordinance.

ii.      Indemnity clauses: Allocate liability for environmental violation risks to clients.

b.      Monitor legal developments

i.       Track new Hong Kong laws: e.g., potential mandatory climate disclosure rules.

ii.      Watch global trends: Cases like Shell’s net-zero lawsuit could influence Hong Kong litigation risks.

5.      Shift capital toward sustainable finance

a.      Expand green and transition finance

i.       Support Hong Kong’s green bond market (a key government priority).

ii.      Offer lower-interest loans for projects aligned with China’s 2060 carbon neutrality goal.

b.      Invest in climate resilience

i.       Fund flood defenses, renewable energy, and sustainable urban projects to reduce future liability.

By taking these business policy management measures, Hong Kong’s financial sector could lower legal exposure while supporting the city’s role as a sustainable finance hub.

For further information on green financing, please also read our green series articles published in September 2024, “Green and sustainable banking” and “Green and sustainable debt financing”.

For enquiries, please feel free to contact us at:

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.

Published by ONC Lawyers © 2025